A recent report on the economic growth prospects for 2024, released by international financial organizations, all indicate that the Vietnamese economy will experience a strong recovery in 2024, following a “resilient” year in overcoming the “headwinds” from the global economy.
In the Global Economic Outlook report for Q4 (December 2023), the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics stated that despite a slowdown in growth in 2023 and 2024 compared to pre-pandemic levels of 7%, the miraculous growth story of Vietnam is far from over.
“In the context of global supply chain innovation, Vietnam emerges as a key ‘winner,’ with export growth projected to continue to accelerate in the medium term. Along with that, increased investment from multinational corporations will drive Vietnam’s GDP growth to outperform other ASEAN countries, at least until 2030,” the report stated. According to ICAEW, the projected economic growth rate for Vietnam in 2024 is 5%, higher than the forecasted growth rate of 4.7% for 2023.
AMONG THE WORLD’S LEADING GROWTH GROUPS
From the perspective of the International Monetary Fund (IMF), Vietnam’s GDP in 2024 is also positive with a growth rate of 5.8% and is among the top 20 economies with the highest growth rate in the world. The top performers in terms of growth are Macau (China) with 27.16% growth, Guyana with 26.56% growth, Palau with 12.40% growth, Niger with 11.14% growth, Senegal with 8.82% growth; Southeast Asia includes Cambodia (6.13%) and the Philippines (5.88%), which are forecasted to have higher growth rates than Vietnam.
One of the reasons why the IMF is confident in Vietnam’s growth prospects is thanks to the economic growth support platform that Vietnam had before the Covid-19 pandemic, which is expected to be maintained in 2024 despite the export-oriented economy being greatly impacted by reduced demand from outside in 2023. Therefore, the IMF believes that Vietnam’s GDP growth in 2025 can reach 6.9%.
In a recent report, the Asian Development Bank (ADB) also forecasted that Vietnam’s economic growth will reach 6% in 2024 as external markets recover better than in 2023.
Fitch Ratings, a credit rating agency, also evaluated that Vietnam’s monetary policy has greatly supported the country’s economy in 2023. Based on this, it is forecasted that Vietnam’s economic growth will reach 6.3% in 2024 and 7.0% in 2025. Fitch Ratings also believes that the medium-term fundamentals of Vietnam’s economy remain positive and medium-term growth prospects could be around 7% per year thanks to strong growth momentum from FDI inflows and abundant labor supply.
Vietnam’s economic growth rate in 2024 is expected to be 5.5% and in 2025 is 6% according to the World Bank (WB). Vietnam continues to be among the world’s leading countries in terms of economic growth.
In general, according to international organizations, Vietnam’s growth prospects in 2024, as well as in the medium term, are positively evaluated thanks to the recovery of domestic consumption, exports, and the promotion of public investment, as well as increased foreign investment capital. However, there are still inherent risks associated with growth.
Specifically, according to the ASEAN+3 Macroeconomic Research Office (AMRO), Vietnam’s economic growth prospects in the near future are still fragile due to the projected moderate global economic growth.
Not only that, the financial sector faces a high credit risk when the challenging economic environment has led to an increase in bad debt. Moreover, some real estate investors are struggling with debt repayment and recapitalization, which may lead to debt defaults. The decrease in corporate bond liquidity may render enterprises unable to refinance, thereby increasing the risk of default.
In addition, difficulties in developing micro, small, and medium-sized enterprises and the shortage of skilled workers may affect Vietnam’s competitiveness in 2024 as well as in the medium and long term.
STILL RISKS WITH GROWTH
According to the World Bank’s observations, Vietnam’s economy is still experiencing difficulties as the Purchasing Managers’ Index (PMI) continues to decline in November 2023 (47.3 – the lowest since May 2023), compared to 49.6 and 49.7 in October 2023 and September 2023 respectively. S&P Global PMI indicates that the number of new orders decreased in November 2023, indicating that the recovery of demand is still quite fragile.
Retail sales (representing domestic consumption) recorded a slight decrease of 0.27% in November 2023, following a 1.65% increase in October 2023. “Starting from a deceleration to 5.0% compared to the same period in July 2023, retail sales growth accelerated back but stalled at an average of about 7.5% (compared to the same period) from August to November 2023, much lower than the pre-pandemic growth rate of about 12% year-on-year,” WB analyzed. According to WB, the recovery of the economy is still uncertain despite the better economic activities in the last months of the year.
Similarly, ADB also recognizes risks to Vietnam’s economic prospects. Specifically, domestically, systemic issues in disbursing public investment capital and structural weaknesses in the economy are the main risks leading to a slowdown in growth.
Moreover, externally, slow global economic growth and a slower recovery in China could negatively affect Vietnam’s exports, production activities, and employment. High interest rates in the US and Europe, along with a stronger US dollar, may create additional difficulties for external demand recovery, leading to a depreciation of the Vietnamese dong.
Vietnam has implemented some growth supporting measures, including temporary reduction and deferral of land rents and certain taxes, interest rate cuts, and credit support measures to boost growth in 2023.
In the coming time, AMRO suggested that given the difficulties and financial pressures in the real estate market, Vietnam needs to apply appropriate combined policies to support growth while maintaining financial stability…
The full content of the article is published in the Vietnam Economic Magazine issue 7+8-2024 released on February 12-25, 2024. Please find the full article here:
https://postenp.phaha.vn/chi-tiet-toa-soan/tap-chi-kinh-te-viet-nam
